Market Conduct Consumer Protection Challenges
Catherine Simmons Managing Director and Head of Government Affairs Asia Pacific September 2014 Bali Indonesia
The Framework
Conduct Risk
oComprises a wide variety of activities and types of behaviors oOutside main categories of risk such as market, credit, liquidity and operational risk
oRefers to risks attached to the way a firm and its staff conduct themselves oGenerally agreed to incorporate customer treatment, staff remuneration and management of conflicts of interest
Thomson Reuters Conduct Risk Report 2013 3
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Key Ideas in Behavioral Economics Present bias Reference dependence and loss aversion
Regret and other emotion-driven preferences Overconfidence Over-extrapolation Projection bias
Mental accounting and narrow bracketing Framing, salience and limited attention Decision-making rules of thumb
Persuasion and social influence Bounded willpower Bounded rationality UK FCA Occasional Paper 1 2013 Annex and Speech
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Emerging Concepts
Responsible Finance
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Treating Customers Fairly
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Customer Charter
Impact on Company
A Commitment to Responsible Finance
Business Conduct that is:
Transparent Prudent Dependable
Citi Global Citizenship Report 2013 7
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How Do We Do Business
Citi Code of Conduct 2013
Outcomes
We strive to create the best outcomes for our clients, shareholders and communities with financial solutions that are simple, creative and responsible.
Treatment
Treating our customers fairly and in a nondiscriminatory manner is deeply rooted in our core principle of responsible finance
Commitment
Trust
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All of our products, services and programs reflect our commitment to serving our customers with fairness, transparency, prudence and dependability. We must fulfill this commitment by listening to our customers, understanding their needs and offering appropriate solutions so we can continue to earn what matters most – their trust.
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Conduct Risk Targeted Reviews Assess business plans and strategy for forward-looking indicators of conduct risk, such as products with asymmetric bargaining power, high profit margins, and/or an imbalance of the risk/return ratio.
Business strategy
Conduct Risk Program
New product approval processes
Pay attention to areas that could give rise to conflicts of interest. Conflicts of interest
Incentive-based compensation
Reexamine incentive compensation plans through the lens of conduct risk. Place an emphasis on those plans that might increase the risk of mis-selling.
Review processes governing approval of new and their output to identify potential conduct risks.
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Responsible Marketing Our Objectives
We seek to fairly represent our products and services and to communicate with clients in a straightforward way that is jargon-free and transparent. Lawyers, and/or compliance officers, review our advertising and marketing materials to ensure they clearly and fairly represent the offer, satisfy any product-specific disclosure and contractual demands, and comply with all legal and regulatory requirements In Japan, we have developed easy-to-read guides to account features and fees to support credit card holders available on paper and digitally. In the United States, our easy-to-read guide to account features and fees, Plain Talk about Your Products, is part of account opening processes
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Promoting Financial Inclusion and Economic Progress
Our Program We look to provide financial opportunities, access, knowledge and support for underserved communities and individuals worldwide. We strive to treat our customers fairly and support them in times of financial difficulty, as embodied in our commitment to Responsible Finance.
The Citi Foundation donated $78 million in 87 countries, enabling 1.3 million people to make progress towards financial inclusion and economic progress
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Financial Education The Indonesian Example
BUSINESS RESPONSIBILITY : Responsible Advice to Customers & other Consumers
COMMUNITY RESPONSIBILITY : Support for Low Income | Disadvantages | Advocates | Practitioners
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Activities
Intermediate Outcomes
2 Financial Education
Save & Invest Wisely
Financial Capability The ability to make informed judgments and effective decisions about the use and management of one’s money
Financial skills, knowledge, understanding, awareness of rights
Final Outcome
Full Financial Inclusion Access for individuals to appropriate financial products and services. This includes people having the skills, knowledge and understanding to make best use of those products and services
Save & Invest Wisely Publication | Seminar | Economic Outlooks |Financial Literacy Survey | Educational website
1. Fin-Q Financial Literacy Survey
Indonesian Fin-Q Survey •
Between 7-14 October 2013, Citigroup’s Asia Pacific research partner conducted a total of 500 online interviews across Indonesia.This survey has been conducted on annual basis over the last 7 years
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In order to be eligible for the study, all respondents had to be over 18 years of age and have either a bank account or own a major credit card.
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The questionnaire was administered via an online survey methodology.
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The questionnaire consisted of over 80 questions and covered a range of topics related to making smart financial decisions and having good financial habits.
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The average interview length was 29minutes.
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At the country level, the results of a sample size of N=500 are said to be accurate to within +/-4.5%, at the 95% confidence level. Citi Fin-Q Survey (Oct 2013)
Citi Fin-Q Score Result Summary Looking at the individual elements of the Citi Fin-Q Score revealed the following: •
The combined Citi Fin-Q Score for Indonesia was 60.7 (up 3pts) points out of a possible 100 points – this represents the highest score since research started in 2007.
The overall results show that two-thirds of Indonesians (69%) have a Fin-Q Score of 50 or more.
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The demographic data show that males typically outscore females and that the average Fin-Q Score tends to increase according to one’s age, income and retirement savings.
Only 36% make and stick to a monthly budget, a further 55% make a budget but don’t always stick to it
Only 56% believe they have enough insurance to protect both them and their families Only 31% have a formal retirement plan and 9% have an up-to-date will 66% set aside or save some money every time they get paid •
71% pay off their outstanding credit card balance in the average month
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80% are somewhat/very satisfied with their current quality of life
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89% are somewhat/very optimistic about their financial futures
Citi Fin-Q Survey (Oct 2013)
Comparison 2007 vs 2013 2013
2007 •
Indonesia’s Fin-Q score: 52.2 (out of 100)
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Indonesia’s Fin-Q score: 60.7 (out of 100)
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If they lost their jobs tomorrow, most respondents said their savings would last them less than 11 weeks
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52% of Indonesians think their savings would last more than 3 months if they lost their job
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6 out of 10 Indonesians do not plan for their retirement
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74% of Indonesians express confidence with their retirement savings
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Less than 25% have a formal retirement plan
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31% have formal retirement plan
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58% admitted an “average” understanding of personal financial management
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65% feel they had a “good” or “very good” understanding about money management and personal finances
Source: Citi Indonesia Fin-Q (Financial Quotient) Survey 2007
Source: Citi Indonesia Fin-Q (Financial Quotient) Survey 2013
2. MYWEALTH Educational Website
3. USE CREDIT WISELY Localized Credit Tools & Advice 10,000 booklets produced & distributed
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4. SEMINARS & EVENTS Outreach to Customers & Investors in collaboration with major industry players
Citi Pension Fund Seminar 2012 The importance of risk management for pension funds was top of the agenda at the Citi Indonesia pension fund seminar held on October 11th in Jakarta.
Citibank Financial Education Series A journalist class with the theme of “Opportunity and Investment for Indonesian Women” was held to give a better understanding on a better financial management for women.
Citibank Financial Education Series Citi conducted the Financial Educations Series to help customers understand investor psychology as well as alternative investments.
Citibank Financial Education Series – Journalist Class A journalist class with the theme of "Multiply and Protect your Wealth" was held to give a better understanding on investment to the journalists
Citi Coaching Clinic for kids
Community Youth Education | Financial Capability | Microfinance
Committed to the economic empowerment and financial inclusion of low-income individuals , families and communities in the areas where we work so that they can improve their standard of living
Microfinance
Financial Capability and Asset Building
Enterprise Development
Youth Education and Livelihoods
In each of our focus area, we strive to partner with organizations that demonstrate a commitment to sustainability and incorporate sound environmental practices in their programs
Citi Foundation in Indonesia Focus Areas
• In 2013 , Donated USD 860,000 • Since 2004 has donated around USD 6 Million
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1. Petualangan Agen Penny Partner : Yayasan Mitra Mandiri dan Teater Koma
Partner Since 2007 (7 years) Partnership Goals
• Financial education through theater showcase for school children • Saving program for children of ages 6-14 • Awareness of Banking products Key Beneficiaries: Students in urban and rural areas Geographical Coverage - Elementary School JABODETABEK Areas Current Reach • • • • • • • • •
36.322 Students watched Agen Penny performances 6.595 Students started to save their money after watching Agen Penny show 390 SHOWS up to April 2013 432 SCHOOLs organized Agen Penny shows 455 CITIpeka Volunteer participated 2.160 TEACHERS accompanied students during Agen Penny 5.000 STUDENTS registered as follower on Agen Penny Facebook 10.400 COMIC given to several school library 74.600 VISIT Agen Penny website
Partnership Highlights Financial Education Program for children of ages 6 – 14 (Elementary School Grade 5 & 6 ) through a theater performance and comic book
More than website
74.600
visitors on Agen Penny
&
5000
More than media and Facebook.
follower on Agen Penny social
Yayasan Mitra Mandiri Indonesia develop website www.agenpenny-id.com , social media and Agen Penny Facebook as communication and interactive media for the program in order to expand the coverage area of Agen Penny program
2. Urban Youth Financial Education Partner : Plan International & Prestasi Junior Indonesia Partner Since 2012
Partnership Goals •
Contribute to increased economic security of targeted youth in school and improve their employability through provision of the financial education and entrepreneurship trainings
Key Beneficiaries: Students in lower income areas (Jawa Timur) Geographical Coverage - 10 Senior High School in Surabaya & Sidoarjo Current Reach •
4,008 students trained | 1,033 students maintain monthly budgets for at least 3 months
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968 students opened saving accounts | 889 students reported increase in saving balance by 20% 10 student companies established | 200 students participated in student companies program
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Partnership Highlights This program is to inspire students on entrepreneurship concept and banking products | including to start a company
3. Citi Micro-entrepreneurship Awards (CMA) Partner : UKM Center FEUI Partner Since 2005
Partnership Goals •
To motivate and inspire micro entrepreneurs across Indonesia in order help them grow, be an independent and increase their economics scale
Key Beneficiaries:
Micro entrepreneurs in rural areas with turnover < IDR 100 million/year or with nett income around IDR 3million/month and having loan from LKM Geographical Coverage - All over Indonesia •
Current Reach
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4,403 participants
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82 Winners from 2005 – 2012
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Involving more than 130 Citi volunteers Partnership Highlights To leverage micro entrepreneur knowledge in business and financing
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4. Financial Education for the Poor Partner : Lembaga Management Fakultas Ekonomi Universitas Indonesia (LMFE-UI) Partner Since 2007 Partnership Goals • Expanding financial education curriculum for unprivileged society through Training of Trainers (ToT) Key Beneficiaries: People in urban and rural areas Geographical Coverage - All over Indonesia | 28 urban area
Current Reach • Participants up to 600 people • More than 300 organizations participated in ToT, they are: • Koperasi | Lembaga Keuangan Mikro (BMT, Credit Union) | Lembaga Swadaya Masyarakat | BPR (Bank Perkreditan Rakyat) • Trainer (Dinas Kelautan dan Perikanan, Dinas Pertanian, Dinas Peternakan dan Dinas Kehutanan)
Partnership Highlights Participants who have completed the training will directly go back to their society-communities which are built by BPR, Koperasi, Lembaga Keuangan Mikro non-bank as trainers
5. Housing-led : Financial Education Program Partner : Habitat for Humanity Partner Since 2012 Partnership Goals • •
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To help in making better house financing decisions To empower financially excluded 600 low-income families living in Jakarta and Surabaya in making better financial decisions, particularly regarding their housing goals. Delivered FE to beneficiaries in a financially sustainable manner by partnering with PKK Dukuh Kupang Utara (in Surabaya) & Koperasi Yayasan Cinta Anak Bangsa (in Jakarta)
Key Beneficiaries: From low-income families with children Geographical Coverage - Jakarta & Surabaya Current Reach • 350 participants in Jakarta | 250 participants in Surabaya • Participants increased their level of financial knowledge & awareness significantly in 4 areas: budgeting, savings, debt management and planning for housing needs. • Target individuals demonstrated at least one of the following skills and attitudes: (i) budgeting and (ii) savings. • Trained women actively involve in their household financial decisions
6. Financial Education for Mature Woman Partner : Asosiasi Pusat Pengembangan Sumberdaya Wanita (PPSW) Partner Since 2011
Partnership Goals • Participants will acquire financial knowledge and practical skills on self-financing, savings, loan management and financial independent in mature age Key Beneficiaries: Underprivileged mature women (above 40 years old) in urban & rural areas Geographical Coverage • 6 Provinces
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Aceh | Riau | Kalbar | Jawa barat | DKI | Banten
Current Reach - more than 730 women graduated from the program
Partnership Highlights Financial program for mature women (above 40 years) first in Indonesia
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Financial Education for Mature Women Training
ACEH
BANTEN • •
RIAU
JABAR
JAKARTA
KALBAR
6 Months Training to learn 6 financial Modules with 4 sessions per module for 2hours Number of participants from batch 1 & 2 are 731 people (reach 120% from the original target of 600 people)
GRADUATION OF FINANCIAL EDUCATION OF MATURE
Last year, there are 731 successfully graduated from the Financial Education Program for Mature Women.
To be judge by their presence in class and having financial planning
7. UANG ANDA Partner :Yayasan Ladang Media Partner Since 2007
Partnership Goals •
Financial Education to all society
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Financial inspiration
Key Beneficiaries: • For families, employees, college students, and SME including individuals with personal financial problems Geographical Coverage • Across Indonesia 34 provinces | B-C segments • Have approx. 4million viewers Current Reach • TVRI every Thursday at 07:30AM - 8:00AM • website: 1,036,789 visitors • facebook: 5,000 friends | facebook group: 2,478 likers • Twitter: 2,911 followers • Number of questions: 372 questions | Direct phone calls : 138 persons | Number of episode : 27 episodes Partnership Highlights
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Since 2007, this program is becoming source of information and interactive TV program for all B – C segments viewers
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